Its property market was able to get back on to an even keel relatively quickly, while that of its neighbour, the US, went through several years of subdued activity.As the US property market makes its comeback, Mark E Johnson looks at how Canada's is faring.If we go back to when the global financial crisis really hit home in North America, Canada, like the rest of the developed world, went into recession and its real-estate market contracted," says Phil Soper, president of cross-border property firm Royal LePage Real Estate."The difference is that the contraction was very short- lived here. It was about a nine-month correction, whereas our businesses in the United States were in decline for five or six years. As a result, home prices in Canada have been appreciating since the beginning of 2010. So we've had five full years of appreciation, whereas, for America, this is the big year back. They had some recovery last year, but this is the biggest year in eight years, and there's more room to grow."The headline figures show a solid Canadian market. In October, the Canada Mortgage and Housing Corporation (CMHC), which advises the federal government on housing policy, said that it expected 7.2 per cent year-on-year price increases in 2015."In 2015, increased housing-market activity in provinces like Ontario and British Columbia – provinces that have benefited from declining energy prices, a lower Canadian dollar, and when the global financial crisis really continued low mortgage rates – offset slowdowns in oil-producing provinces like Alberta," says Bob Dugan, the CMHC's chief economist, reflecting on his organisation's figures.Going forward, though, the numbers are likely to drop off. "We expect that this counterbalancing effect will decrease over time. As such, housing starts and MLS [multiple listings services] sales are projected to moderate in 2016 and 2017," Mr Dugan adds.According to the CMHC, the annual increase in prices will be down to 1.3 per cent in 2016, and it will only climb to 1.4 per cent in 2017.Furthermore, the numbers are distorted by the markets in Toronto and Vancouver. The Canadian Real Estate Association reported in October that prices for the month were up by 8.3 per cent year on year, but said that the figure would drop to 2.5 per cent if Toronto and Vancouver were removed from the mix.Phil Soper says, "The Vancouver and Toronto markets have structural limitations on supply which have resulted in much higher than average appreciation, because there aren't enough homes available for sale – either new homes or resale home – to meet the demand. So prices, particularly in the detached home section, are rising rapidly."PwC noted in a recent report, Emerging Trends in Real Estate: Canada and the United States 2016, that many of its survey respondents thought that, after years of expansion, the Canadian real-estate market might be due for a breather, and that, because of this, many property owners were entering holding patterns. Many were slowing their acquisitions in Canada, focusing on existing holdings and on opportunities in the US, while landlords were concentrating on bringing in new tenants and extending the leases of existing ones.While respondents were concerned about the impact of the energy sector on real estate, PwC said that few firms seemed concerned that wider economic factors would cause significant problems for their businesses.The US, meanwhile, is looking much more even. "Nationwide, we're seeing around 5 per cent appreciation," Pandra Richie, president of US-based Long & Foster Corporate Real Estate Services, says. "In some markets, it's more; we have some markets that are in double-digit appreciation. Some are seeing less than that. But I would say it's a steady market."We still have a lot of markets where there's a shortage of inventory. If something is priced right and it's in good condition, it's selling very quickly."On the rental side, Sandra Cairns, VP of Dwellworks Canada, a member of Cartus's Global Supply Chain Network, says that expecting the Canadian and US markets to mirror each other is a mistake."Many often fail to see the differences between Canada and the US because the two countries share various similarities and are in such close proximity to one another. But, in general, the majority of Canadian rental markets are more competitive than most centres in the US."However, heavily populated metro areas and industry-specific markets – for example, the technology sector in San Francisco – experience the same low vacancy and high rental rates that are comparable to the higher rents in Toronto and Vancouver."

Toronto and Vancouver

Explaining the spiralling prices in these two cities, Phil Soper says, "They have the lion's share of immigration and the lion's share of current economic growth, thanks to goods and services exports having really picked up with the US recovery."In addition, Vancouver has oceans and mountains and Toronto has legislated green belt and the Great Lakes, so these cities, while very large, are physically constrained in terms of their growth. So you're finding supply shortages and spikes in prices."Indeed, the rise in Canadian house prices is continuing to outpace rises in incomes, especially in the high- growth areas of Toronto and Vancouver. According to PwC, one result of this is that more and more people are choosing to rent. In some cases, this is even occurring as a permanent choice, and some retired people are opting to rent a similar property after they sell, rather than buy a smaller home.
Developers are looking to match this trend with purpose- built rental properties, though PwC notes that some of its interviewees expressed concern that the supply of such units in Toronto might surpass demand. Still, luxury apartments may become increasingly popular with retirees and Baby Boomers.This, of course, is having an impact on expat rentals. "Often, when expatriates come to Canada on assignment, they have specific types of rental property in mind, particularly executive single-family homes and high-end condo apartments in the most desirable and established neighbourhoods," Sandra Cairns says."Naturally, supply and demand dictate rental prices on all new leases anywhere in Canada. In markets such as Vancouver and Toronto, demand is typically greater than supply. In the most sought-after neighbourhoods, bidding wars and multiple rental offers frequently drive up rents."

Urban living

The trend towards urban densification continues, but the pattern may begin to shift over the longer term.It's becoming increasingly difficult for developers to build affordable housing in urban centres, partly because of the very policies designed to promote urban density, according to PwC. Land prices are on the rise, thanks in no small part to green-belt legislation in Ontario and British Columbia.Additionally, long approval processes and high development charges, with the growing cost of construction, are driving up costs. Some argue that this could lead to changes in urbanisation trends, and the expansion of city transit systems could make buying affordable houses away from urban cores more viable.Oil-price collapse
Meanwhile, in Alberta, the province worst hit by the oil-price collapse, the outlook is much more subdued on the sales front. "What we saw in the big cities in Alberta in 2015 were stable home prices but significant drops in unit sales," says Phil Soper."This means is that people generally feel that the long-term economic prospects in the province remain good, and they're unwilling to sell their home at a discount.
"But there's no sense putting their home on the market, because buyers are feeling risk-averse. They feel prices could drop. So there's this gap between seller and buyer expectations."In our monthly figures, we're seeing the first material decreases in property prices since the oil crisis, and it's taken about a year for those to show up. My expectation is that we'll see softness in prices, most predominantly in Fort McMurray, secondly in Calgary, then, to a much lesser extent, in the smaller cities – Edmonton, Red Deer, Lethbridge – where the economies are more balanced."That, of course, means a happier picture for those wishing to rent. "According to the CMHC's Spring Market Report, released in mid-June, Calgary's vacancy rate was 0.2 per cent," says Sandra Cairns. "However, with the additional layoffs in the oil and gas industry this past autumn, indications are that vacancy rates will continue to increase into the spring and summer of 2016."The types of property most affected by this change are high-end, single-family homes and executive rentals. As more rentals have become available, landlords are offering incentives they haven't offered in many years, such as a month's free rent on new leases."

The future of assignments

In terms of mobility, Sandra Cairns notes a couple of emerging trends. "Within the last year, we have seen a significant increase in the number of short-term assignments, where the employee moves on a temporary basis. Their assignment typically lasts between six months and two years, while the family stays in their home country."Due to this growing trend, there has been an increase in authorisations for furnished condo apartments, town homes, and single-family homes. We believe this trend will continue into 2016."There's a trend for a very different type of property, far from the cities, however.
"Canada has several small towns because it is such a large country with a highly natural-resource-based economy, and this leads to relocations in especially remote locations," says Sandra Cairns. "Finding the right rental property in a larger city can be challenging, but finding rentals in a town where the population is 50,000 or fewer, with little or no availability of suitable rental properties, is equally difficult."Providers and clients have begun to think outside the box, and have come up with creative solutions. Prefabricated and 'tiny' houses on corporate-leased land may become the new normal for small-town relocations."

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